| Profits Tax |
85. I propose that the profits tax rate for corporations be increased from 16% to 17.5% with effect from 2003-04. In addition, I propose that the rate of deeming assessable profits for certain payments such as royalties be increased from 10% to 30%.
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86. I further propose that the profits tax rate for unincorporated businesses be increased from 15% to 16%, to be implemented in two phases in two years, in line with the adjustments in the standard rate of salaries tax.
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87. Hong Kong has a simple profits tax system with consistently low tax rates and many concessions. We do not have capital gains tax nor do we impose tax on dividends. The proposed rates are still lower than those in neighbouring economies, and the 18.5% rate we had in the 1980s. Our competitive edge will not be affected by the revision in profits tax rates. When fully implemented, the proposals will generate additional revenue of $3.5 billion for the Government in a full year.
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Property Tax
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88. I propose that the property tax rate be increased by one percentage point to 16% and be implemented over two years in line with the salaries tax standard rate adjustment. The proposal, when fully implemented, will generate $70 million additional revenue for the Government in a full year.
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